FINTRAC fines Canadian bank with no name a fistful of dollars

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the federal agency responsible for the detection, prevention and deterrence of money laundering and terrorist financing, has, for the first time, imposed an administrative monetary penalty on a Canadian bank. The penalty of more than $1.1-million comes at a time of increased scrutiny of Canadian financial institutions and financial transactional crime as a result of the publication of the Panama Papers.

According to FINTRAC, the bank breached requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act by failing to:

  • report a suspicious transaction
  • report the receipt of $10,000 or more in cash in the course of a single transaction
  • report the sending out of Canada of an electronic funds transfer of $10,000 or more in the course of a single transaction
  • report the receipt from outside Canada of an electronic funds transfer of $10,000 or more in the course of a single transaction
  • develop and apply written compliance policies and procedures that are kept up-to-date and are approved by a senior officer

The penalty has received significant attention given that this is the first time FINTRAC has taken this type of action against a bank.

What appears to have stirred the most public reaction, however, is the fact that FINTRAC chose not to identify the bank in question. A number of commentators have criticized this decision. The main objections seem to be that:

  1. not naming the bank has less deterrence effect (since not naming means not shaming and no public denunciation)
  2. other smaller entities that have been previously fined by FINTRAC have been named, so why shouldn’t the bank be named? Note, however, that FINTRAC has sometimes withheld the names of entities that have been penalized in the past.
  3. not naming the bank casts a shadow over the banking sector as a whole
  4. there should be more transparency when anti-money laundering and anti-terrorist financing laws are violated

Each of the big six Canadian banks has publicly stated that it was not the one that was penalized. Other banks may feel pressure to make similar statements, which may make it possible to identify the offending bank by process of elimination.

Perhaps FINTRAC’s objective in imposing the fine without naming the bank was to send a general message to the banking industry, without risking a failed prosecution and waiting for a potentially lengthy appeals process to be exhausted.  Given the amount of attention the penalty has garnered, it seems that FINTRAC’s message has been broadly received.

It will be interesting to see whether additional penalties for Canadian banks are on the way, and whether FINTRAC will identify offending banks in the future. The Wall Street Journal reported last year (based on an access to information request) that between 2009 and 2014, the Office of the Superintendent of Financial Institutions logged 72 failures of anti-money-laundering controls at Canadian banks. This suggests that if FINTRAC is inclined to continue to flex its muscles, it will have the opportunity to do so.